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Natural gas market and prices of gas

Medium-term horizon

Price of natural gas on wholesale market in the Czech Republic will keep correlating to prices on main European markets, especially to Gaspool, the German market area. The relation will further be strengthened by high capacity of cross-border profiles of both countries and high volumes of gas flowing to Germany from the Czech Republic. The situation is not going to change even after the planned fusion with the other German market area, NCG, in 2021 and prices on European markets (Germany, Netherlands, UK, Belgium and France) will remain the main factors of gas pricing for the Czech virtual trading point (VTP CZ). Gas prices on European markets will almost stop to reflect prices of alternative fuels (coal, oil). Gas prices in Europe are dominantly affected by market mechanisms – balance between demand and supply. The state will further be intensified by oil indexation being gradually pushed out of long-term contracts. According to the reference scenario, the anticipated change in gas price on European markets will have a slightly increasing tendency up to the 23 EUR/MWh.

Long-term horizon

The outlook beyond 2030 anticipates maintaining of the increasing tendency with the assumed average annual gas price on Czech market between 23 and 27 EUR/MWh in the case of the reference scenario which works with balanced demand for gas and its supply on European market. The role of new forms of gas – renewable gases (biomethane, synthetic methane, hydrogen) – remains to be a big unknown. They can enter the gas system despite the lack of primary market incentives but with a support of various subsidy mechanisms. In such a case, increase in gas price affected by size of the support and share of supported gases in total gas consumption is anticipated. The estimated annual investment in the gas industry is approximately CZK2019 21 billion for the Conceptual case study and it is CZK2019 16 billion for the remaining two in 2060.

Figure 18.1 Estimated investments into gas industry